By now you probably know that the U.S. Department of Justice launched an antitrust lawsuit against Apple and two publishers this month following an investigation into Apple’s eBook pricing agency model. Three publishers, including Hachette, HarperCollins, and Simon & Schuster, decided to reach a settlement with the Department of Justice to return to Amazon’s set-your-own price wholesale model. Meanwhile, Apple, Macmillan, and Penguin will take the fight to court.
Interestingly, a report from The Wall Street Journal, which is owned by the HarperCollins’ parent company News Corp, suggested Apple was only ever trying to continue its App Store business model. The Wall Street Journal’s L. Gordon Crovitz described visiting Senior Apple Executive Eddy Cue to discuss changing Apple’s policies for publications. He quoted Cue as comparing book pricing to apps and not wanting to treat publications differently than app developers:
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‘I don’t think you understand. We can’t treat newspapers or magazines any differently than we treat FarmVille.” … With those words, senior Apple executive Eddy Cue stuck to his take-it-or-leave-it business model of a 30% revenue share payable for transactions through the iTunes service. Despite my arguments to Mr. Cue in Apple’s Cupertino, Calif., offices last year on behalf of news publishers seeking different terms, to him there was no difference between a newspaper and an online game.
As Crovitz pointed out, Cue’s quote and philosophy on book pricing “should be the defense’s Exhibit A” when Apple and the two publishers finally land in court with the Department of Justice. In other words, the 30 percent revenue model is Apple’s “standard practice,” not the result of collusion as the Department of Justice alleged.
It appears that many in the industry would agree with Cue and Crovitz. Apple told the Department of Justice in its refusal to settle, “Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.”
Novelist and President of the Authors Guild Scott Turow is taking Apple’s side:
The proposed settlement is a shocking trip through the looking-glass. By allowing Amazon to resume selling most titles at a loss, the Department of Justice will basically prevent traditional bookstores from trying to enter the e-book market, at the same time it drives trade out of those stores and into the proprietary world of the Kindle. The settlement provides a gigantic obstacle to Amazon’s competitors in the e-book business by allowing Amazon to function without making a profit, something that leaves that market forbidding to anyone else who might think of entering, and a bad business for those already there… Today’s low Kindle book prices will last only as long as it takes Amazon to re-establish its monopoly. It is hard to believe that the Justice Department has somehow persuaded itself that this solution fosters competition or is good for readers in the long run.
- DOJ explains settlement with three publishers, Macmillan CEO explains why they won’t settle (9to5mac.com)
- Apple finally comments on DOJ antitrust charges: ‘We’re breaking monopolies not starting them’ (9to5mac.com)
- US government sues Apple in eBook price-fixing antitrust suit (9to5mac.com)
- Report: DOJ to sue Apple this week over fixed eBook pricing allegation (9to5mac.com)
- Apple eBook price-fixing lawsuits hit Canada following DOJ suit (9to5mac.com)